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  • Julien Haye

Transforming Risk and Compliance Functions into Strategic Enablers

Transforming Risk and Compliance Functions into Strategic Enablers

Uncertainties are accumulating in your organisation, and you have no idea where to start. You thought you had a firm grasp on your risks, but a significant regulatory breach or cyberattack has just caught you off guard.


A considerable portion of the resources allocated by commercial enterprises, non-profit organisations and charities, and governmental entities are devoted to risk management and regulatory compliance. A significant proportion of them lack risk and/or compliance departments. Each organisation, regardless of its sector, is subject to a set of laws, regulations, and rules, particularly in regulated sectors with substantial entry barriers.


Under such circumstances, risk and compliance functions are not mere niceties. Instead, you need to see them as strategic enablers for your organisation. Leveraging extensive risk management and compliance capabilities, combined with a risk-friendly culture, can transform these functions into strategic, powerful tools for achieving organisational mission and objectives. Here’s how businesses can achieve this transformation.


Are you in trouble?


Here is a list of potential signs things might not be going well:


  • Regulatory Penalties: Your organisation just faced heavy fines and legal repercussions. KPMG notes, for instance, that by offering real-time risk information and enhanced decision-making skills, modernising risk and compliance activities can help businesses avoid such penalties.

  • Reputation Damage: Your organisation was attacked in the press for its practices. Good risk management helps keep the finances to carry out strategic plans and prepares stakeholders for uncertainty.

  • Operational Inefficiencies: Your cost structure is ballooning, and you don’t understand why. Ineffective risk and compliance processes can create bottlenecks and reduce operational efficiency, impacting overall performance. McKinsey emphasises that end-to-end risk transformations can significantly improve both efficiency and effectiveness, enhancing transparency, accountability, and customer experience​.

  • Missed Opportunities: You were not aware of that new technology your competitor just acquired. Without a proactive approach, companies may fail to identify and capitalise on growth opportunities, falling behind competitors. Info-Tech Research Group points out that ongoing monitoring and strategic risk assessments are imperative for adapting to market changes and achieving success.

  • Failed Transformation: For the third time, the executive team is launching a business-wide transformation. Some organisations can spend anywhere between 60 and 90 percent of their change budget on activities that do not contribute to their mission and strategic objectives. Stated differently, they are not focusing on the right problems. Managing transformation and change risks is difficult, and more importantly, requires a multi-layered approach connecting change initiatives to the organisation’s strategy and objectives.

Book a free risk and compliance consultation with Julien Haye

Recognising the Risk and Compliance Strategic Importance


Traditionally, risk and compliance have been seen as roles intended to stop unfavourable results. Some organisations may even perceive them as business blockers, as Lloyds Banking Group recently illustrated. Still, their responsibilities go much beyond avoiding fines and making sure regulations are followed. The strategic benefits of good risk management and compliance for your organisation can be substantial and include:


  • Enhancing Decision-Making: By identifying and assessing potential risks, businesses can make informed decisions that account for both opportunities and threats. This also ensures effective resource allocation, bearing in mind that the cost of compliance and risk mitigation has increased by a whopping 60 percent in the financial sector in 8 years (source Deloitte) and the average US firm spends between 1.3 and 3.3 percent of its total wage bill on regulatory compliance (source NBER)

  • Building Trust: A strong compliance framework assures stakeholders, including investors, customers, and partners, of the company's commitment to ethical practices. This also provides a framework to drive standardisation and predictability across your organisation.

  • Driving Innovation: Proactive risk management encourages innovation by allowing businesses to take calculated risks with a clear understanding of potential impacts, as well as identifying potential opportunities.


Integrating Risk and Compliance with Business Strategy


Put simply, risk and compliance must be an explicit part of the overall business strategy and strategic planning of your organisation. This involves:


  • Aligning Objectives: Ensure that risk management and compliance goals advance and complement the company’s strategic objectives. For example, if a company wants to expand into new areas, the risk function should identify and reduce market entry risks.

  • Embedding in Decision Processes: Every strategic decision-making process needs to include risk and compliance factors. This guarantees that every organisational choice is made with a full understanding of the associated uncertainties and compliance needs that go along with it.

  • Leveraging Data and Insights: Making Use of Data and Insights: Obtain an understanding of risk and compliance patterns by using data analytics. This facilitates proactive modification of tactics and helps to foresee possible problems.


Fostering Risk Awareness and Culture


All your risk dashboards are flashing red, but no one does anything about it. The best tool can only work if people can and are willing to operate it. That said, a risk-aware culture, underpinned by deeply rooted psychological safety, is crucial for leveraging risk and compliance as strategic enablers. This entails:


  • Training and Education: Continual programmes to teach staff members of all levels the value of compliance and risk management. This guarantees that every member of your team understands their part in keeping the atmosphere risk aware.

  • Encouraging Open Communication: Create a climate where staff members are at ease bringing up possible hazards and compliance problems. Risk management that works requires psychological safety.

  • Leadership Commitment: Leaders must walk the talk and act as role models. They must demonstrate a commitment to risk management and compliance. Their choices and actions need to reflect how crucial these roles are to the success of the company.


Using Technology and Innovation


Cutting edge technology can improve risk and compliance operations' efficacy. Organisations can use:


  • Automated Compliance Monitoring: By putting software into place that constantly checks that internal policies and regulations are being followed, human error is minimised and productivity is increased.

  • Predictive Analytics: Developing plans to lessen possible risks before they affect the company and forecasting such risks.

  • Integrated Risk Management Systems: Using integrated risk management systems that offer a comprehensive picture of every risk makes it possible to coordinate more effectively and control hazards.


Continuous Improvement and Adaptation


The environment you operate in is constantly changing, and risk and compliance functions must adapt to remain effective. This involves:


  • Regular evaluations: To make sure risk management and compliance plans are in line with present corporate goals and outside regulatory requirements, regular evaluations are carried out, with a focus on capability alignment with mission and strategy.

  • Feedback Mechanisms: Creating systems to get input on the success of risk and compliance programmes from stakeholders and staff.

  • Adapting to Change: Being open to modify plans and pivot in reaction to fresh developments, changes in regulations, and advancements in the company.


It will take a paradigm-shift in viewpoints and methodologies to turn risk and compliance departments into strategic enablers. Your organisation can not only reduce its risks and costs but also materially increase its chance of success by coordinating these activities with the entire business pl

an, encouraging a culture of risk awareness, using technology, and always changing with the times. Experience and a strategic mindset can make risk and compliance effective instruments for accomplishing your goals and preserving a competitive advantage in the market.

Not sure you are on top of your risk and compliance needs? Book a free consultation to discuss insights and potential areas of focus.

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